Take Long View

What: After reporting third-quarter financial results and lowering full-year sales guidance for its best-selling drug, shares in AMAG Pharmaceuticals (NASDAQ:AMAG) slumped by 20.8% earlier today. 

So what: AMAG Pharmaceuticals has been on a spending spree in the past year that includes the purchase of Lumara Health last November and the acquisition of Cord Blood Registry this past August.

Those acquisitions have significantly boosted the company's top line, leading to third-quarter sales of $96.2 million, up from $25.5 million last year, but the deals have also led to higher costs. Total operating expenses, after adjusting for acquisitions and other one-time expenses, grew to $50.6 from $22.3 million a year ago.

Overall, AMAG Pharmaceuticals reported a GAAP net loss of $1.4 million and adjusted non-GAAP income of $42.3 million, or $1.02 per diluted share in the quarter.

In the company's third-quarter earnings release, management also revised down its full-year 2015 sales and cash earnings outlook, ex-effects from its Cord Blood Registry acquisition.

AMAG Pharmaceuticals now expects that sales of Makena, a drug that was acquired in the Lumara Health purchase and that is used to reduce the risk of preterm birth in at-risk women, will be between $250 million and $260 million this year instead of between $260 million and $285 million, and that cash earnings will be between $165 million and $180 million, down from its prior outlook for between $180 million and $195 million.

Now what: The company's spending led to its net long-term debt climbing to $815 million from $293.9 since December, but its non-GAAP gross margin has improved to 93% from 90%, and that could suggest that once the company is done integrating these deals, it will be able to deliver solid bottom-line GAAP performance to investors.

However, in order to do that, the company will need to successfully leverage Makena volume growth for sales growth. Last quarter, Makena's volume increased 42% year over year; however, some of that benefit was offset by a shift in patient mix to include more and less-profitable Medicaid patients.

In the future, AMAG Pharmaceuticals' sales could benefit from a potential approval of a single-dose, preservative-free version of Makena (a decision is expected by the end of this year) and from plans to develop a new auto-injector and a longer-lasting formulation of Makena. 

However, questions remain, and that means a bit of investor caution is warranted until they're answered. For example, I'll be watching to see how big of an impact Medicaid has on Makena sales, and whether or not reported price discounts at Cord Blood Registry last quarter will continue in 2016. If AMAG can prove that those headwinds are short term, then picking up shares may make sense given that they're currently trading at a forward P/E of only 4. 

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.